States find ways to raise taxes without saying so
HARRISBURG, Pa. – If Pennsylvania’s Republican governor gets his way, the state will pay for $1.8 billion in transportation improvements largely by raising a wholesale tax on gasoline. Yet, his spokesman insists, “it’s not a tax increase.”
In New York, Democratic Gov. Andrew Cuomo and Republicans who share control of the Senate boast that they have balanced the budget without raising taxes, even though a critical part of the balancing act involved extending an income tax on high earners that both sides had campaigned against in 2010.
As state government leaders struggle to reconcile public demand for services with still sluggish post-recession tax collections, they have turned to tax increases – but will call them anything but. Governors and lawmakers in several states have labeled their ideas extensions, surcharges or fees and used verbal gymnastics to explain why they aren’t tax increases.
“Anything to avoid using the ‘T’ word is explored. They’re ‘revenue enhancements’ or ‘lifting of caps’ or ‘impact fees,'” said Matthew Brouillette, president of the Harrisburg-based Commonwealth Foundation, a conservative think tank.
“Of course,” he added, “the ultimate result is that more money is coming out of taxpayers’ wallets.”
Raising taxes this year also puts a little breathing room between the laws passed in state legislatures and lawmakers’ 2014 campaigns for office. Still, any opponent would likely seize on such a vote no matter when it was taken, so the labels become part of a delicate dance for politicians searching for both sources of revenue and votes for their re-election.
Strategies include taxing corporations or the wealthy more heavily while emphasizing resulting tax cuts for the middle class, or taxing businesses that will inevitably pass along the increases.
In Georgia, Republican Gov. Nathan Deal engineered an end-run of a politically sensitive vote on the renewal of a tax on hospitals that generated more than $230 million, which was used to secure about $450 million in additional federal Medicaid money this year.
Lawmakers were reluctant to jeopardize the federal funding, but many Republicans feared primary challenges next year if they voted to extend the tax, so Deal and his allies proposed replacing it with a “provider fee” designed to work the same way. Both chambers overwhelmingly approved it and the governor signed it in February.
In Connecticut, where the governor and his Democratic allies in the General Assembly touted a budget with no new taxes, this year’s adjustments included extending a 20 percent increase on the state corporation tax that had been set to expire June 30. House Speaker Brendan Sharkey said it’s debatable whether such actions are tax increases and sought to focus on residents rather than businesses.
“What most people care about is whether their income taxes are going up, whether their sales taxes are going up, not whether corporate taxes are going up. Those are not happening,” Sharkey said this month.